Case Analysis Caregroup

Case Analysis: CareGroup Brief Synopsis The case “CareGroup” prepared by the Harvard Business School recounts an astonishing tale of how the health-care company CareGroup’s leading state-of-the-art information technology (IT) systems had abruptly collapsed for three and a half days, what actions they took to recover, and the invaluable lessons learned through them.

Background and Analysis On October 1, 1996 three prominent hospitals in eastern Massachusetts merged together to form CareGroup. CareGroup was a group of health-care professionals that offered community-based primary care and a broad spectrum of specialty services.

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CareGroup was formed in response to three key factors of the health care industry at that time. Firstly, the intense competitive environment within the industry in the mid-1990s had driven many hospitals to join forces to gain contracting power against HMOs. Secondly, there was a strong demand for hospitals to strengthen their balance sheets in a complex price war due to excess supply.

Lastly, merging hospitals had the opportunity to develop integrated services that could greatly improve the quality of health care as well as drive down costs. The merger that had formed CareGroup had been successful.

Although the road to success had been bumpy the company had produced $1. 6 billion in revenue and became the second-largest group of hospitals in eastern Massachusetts. An unforeseen achievement had been the development of an integrated IT system that linked the entire organization together.

CareGroup became a leading innovator in IT not only recognized as the best in health care, but the finest in any industry. Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis Strengths From a birds eye view the CareGroup IT systems were not only strong, but the most advanced in the nation.

The company enjoyed the best e-mail system, voice and wireless, data center and web-based infrastructure in healthcare. Their IT systems had handled 900,000 patient records dating back to 1977 and 3,000 physicians and 200 staff personnel processed 40 terabytes per day. CareGroup’s CIO John D.

Halamka was also a key strength for the organization. His impressive resume and extraordinary background made him the most qualified CIO CareGroup could hope for. Halamka explains: The reason why I’ve been successful is because I know all the technologies, I program in 12 languages, I written books on Unix system administration.

I am a doctor, so I understand the clinical domain and the technical requirements. But as I tell people, my own blind spot—I’ve wired a telephone closet; I’ve built 100 servers, hundreds of desktops, but never built anything beyond a home network.

It’s just the reality. But, I have now. Weaknesses CareGroup’s weaknesses, which ultimately caused the network collapse, were revealed in the lessons learned from the catastrophic event. Prior to the crash, CareGroup’s belief that they had the most advanced network in the health care industry had inadvertently caused them to neglect the need to keep their IT system updated and controlled.

CareGroup’s systems were completely controlled by one single switch, which was in turn controlled by one single person, who ultimately became the sole point of failure. The company did not have a group of people dedicated to monitoring and controlling the on-going changes to IT and their effects on the entire network.

Opportunities and Threats The merger that had formed CareGroup had given the organization the opportunity to integrate all of the individual hospital’s resources and broaden their quality of care. The company had realized that opportunity which led to the evolution of their advanced IT system.

Unfortunately, CareGroup prior to the network collapse was not as successful in responding their threats as they were with their opportunities. The fast paced nature of the IT industry is a threat that no company, no matter how advanced the network, should neglect. Cisco‘s outside monitoring study services that were ignored prior to the crash had been a key opportunity of the company that played a vital role in the system’s recovery.

Cisco had an advanced engineering team that could review all IT system changes effectively and prevent future network complications.

IT Performance: Past & Present Up until October of 1998 CareGroup’s IT organization was largely decentralized with each of the hospitals running on its own legacy systems that predated the merger. At Beth Israel Deaconess Medical Center, IT operations were complicated by having to run a blend of the systems from each of the merged hospitals. The hospital’s systems were out of date, nonintegrated and very costly. By 2002 all of the CareGroup hospitals had been brought together into one system using the most sophisticated of the nonmedical center hospital’s software called Meditech.

Under Halamka’s reign, CareGroup’s IT had rapidly became the most advance system in health care by 2003.

In September 2001 Information Week ranked the CareGroup IT organization number one in America and had honored them as one of the top 100 companies in the three consecutive years prior. Information Systems (IS) Architecture: Past ; Present CareGroup’s IS architecture, which led to the fatal network collapse, was fully centralized and dependent upon just one main switch. Individual smaller networks had been added one at a time causing the network to grow “out of spec. What directly caused the network to collapse was one CareGroup researcher’s mishap of leaving his experimental software open quickly led to huge data transfers that would monopolize and clog up the company’s main switch. Because all networks were connected to this switch all messages on the network began repeating and reproducing rapidly in an endless loop until the total network was completely disabled. The CareGroup IT was stumped as to how they would ever diagnose the problem when the primary system of the problem was that nothing worked.

At first, everyone had his or her own ideas of what the problem was and impulsively leapt to implement their own ideas of possible fixes. The problem was, as soon as they would make the change and it didn’t work, the problem grew even more complex and harder to figure out. It took Halamka and his IT department only 24 hours to realize that their efforts were counterproductive. Halamka called in Cisco’s SWAT team who was delegated complete and sole authority to deal with the problem. On-site engineers worked continuously with teams throughout the world providing 24/7 acute care and attention to solving the problem.

Another critical decision that played a heavy role in CareGroup’s successful recovery was the decision to remain on backup procedures.

Halamka had realized that you could in fact run an entire hospital on paper just fine. By oscillating back and forth from manual to system, the hospital staff needed to duplicate if not triplicate its work. Three and a half days after the fatal crash Cisco managed to restore the network and CareGroup’s service to its patients was minimally interrupted. Remarkably, there was no instance or evidence of any adverse outcome relating to the network outage. Evaluation

CareGroup’s network collapse had shown the darker side of innovation when it’s not updated and continually seeking to improve.

CareGroup had rested comfortably at the top in IT and made very few strides to keep moving up. In one article published after the crash Halamka (2009) relates what happened to CareGroup’s IT to the “broken window effect,” explaining: Imagine a perfect Lake Wobegon neighborhood, where everything is above average. One day, a baseball goes through a window, and the owner decides not to reglaze right away. Then, because that house looks a bit shabby, a neighbor leaves a junked car on the street.

Then a bit of graffiti isn’t cleaned up. Folks let garbage pile up in yards.

The disorder gives rise to discourtesy and, eventually, crime. Halamka has responded to the lessons of IT by imposing, or allowing Cisco to impose, a zero tolerance policy that the organization did not have before. By examining every incident as it happens rigorously and consistently Halamka has developed a new IT culture that encourages constant improvement based on the sharing of experiences, ensuring that broken windows are fixed and that recurrences are rare.

The change-control board is so rigorous that the board must first approve every single action that affects IT, which begs the question: has CareGroup IT strategy become too careful? Part of the trade-off with innovation is the risk of failure. The event of CareGroup’s network collapse proves that innovation needs to be taken strict precaution, constantly reviewed and monitored. Halamka believes that staying vigil to the “broken window effect” will keep everyone engaged in renewal and growth.